10 Takeaways from the World InsurTech Report 2019

The insurance market dynamics are changing rapidly. While a connected ecosystem is the need of the time, agility and new business models are a way through. The current edition of the World InsurTech Report (WITR) emphasizes on developing synergies between Insurers and InsurTechs for the success of the future insurance marketplace. Here are 10 key takeaways from WITR 2019.

Insurance Business Process Improvements

Tech giants like Alibaba, Amazon, Apple, Facebook, and Google are entering the Insurance space with enormous customer data. Moreover, customers (nearly 30%) are responding positively to buying insurance products from BigTech firms, according to the World Insurance Report 2018. WITR proposes the following business process improvement for Insurers to remain market-fit.

90% of InsurTechs and 70% of Incumbents believe partnerships are crucial. And these partnerships are not confined only to the insurance sector. These can include collaboration with financial, technology, healthcare, travel, transportation, hospitality, retail, and more.

The diagram illustrates the Insurance and InsurTechs’ level of willingness for partnerships – World InsurTech Report 2019

Baloise Insurance partnered with Swiss bank BLKB, and Swiss online insurance broker Anivo to develop a flexible and scalable digital insurance platform with B2C integration. The product released as Bancassurance 2.0 achieved a hit ratio of 50% for video-chat advisory sessions; more than 90% of customers rated the experience as good or very good.

Partnerships can also bring compound insurance products, which otherwise seems impossible. For example, Swiss Re and French cybersecurity InsurTech firm OZON together, launched CyberSolution 360°. It is a risk management solution combining insurance and cyber-attack protection services for small and medium-sized enterprises.

#2 Adopting New Business Models

Not only Insurers, but also customers approve of new insurance models. For instance, 41% of customers are ready to consider usage-based insurance and 37% are willing to explore on-demand coverage. To meet the coverage gaps, offer convenience and personalization, Insurers are adopting the following new business models.

Parametric insurance for covering uninsured risks, based on an objective-triggering event.

Microinsurance services with low-premium packages.

#3 Aligning Strategies with the Future Insurance Marketplace

An insurance marketplace is a viable solution to support a broad spectrum of customer demands. It can also offer coverage for emerging risks and can deliver easy-access compound offerings from individual players of the insurance, manufacturing, and technology ecosystem.

“The insurance marketplace of the future will provide data and insights about customers that the industry never had before. This will allow firms to design a product closer to customers’ needs and, more importantly, offer them the product when they need it!”

For instance, digital integration with aggregators and third parties can broaden the Insurers’ distribution channel. Partnering with OEMs can help them with real-time customer data. Further, APIs, cloud-based storage, and blockchain can foster the insurance ecosystem with data security and transparency.

Inventive Insurers are the ones who have strategically updated their product portfolios, operating models, and distribution methods. They are realistic about their competencies. By identifying their distinct capabilities and partnering with other players to bridge their competency gap, Inventive Insurers can deliver an end-to-end product to the customers.

The World InsurTech Report 2019 defines the competencies of Inventive Insurers as follows –

Capable of making business processes more intelligent, efficient, and effective using AI, automation, and analytics.

Creating new scalable products with shorter development cycles.

Enabling seamless integration with new data sources and distribution models.

Offering value-added services to the customers.

Product Innovations

The tech-savvy customers are seeking easy-to-understand products with the facility of direct online purchases. Even leading Insurer like Berkshire Hathaway’s Insurance Group – BiBerk launched ‘THREE’ – only three pages long product covering workers’ compensation, liability, property, and auto to catch the pace. The drift is towards the following new insurance products.

#6 Bundling Financial and Non-financial offerings

An insurance package comprising both financial and non-financial products can expand an Insurer’s products portfolio, giving a competitive edge. It can also help in pitching new prospects. Bundling products and services will increase customer touchpoints and can help insurers identify their needs more effectively.

For example, Homeflix insurance provides renters and homeowners insurance to its core. In addition to insurance coverage, it also offers concierge maintenance services like plumbing and electricity. The company also plans home delivery, babysitting, and cleaning services next.

#7 Tailored Products

Traditional insurance policies don’t fit today’s desire for add-on services, personalization, and flexible offerings. The World Insurance Report 2019 survey found that more than 75% of B2B customers and 85% of retail policyholders believe they’re not covered against the emerging risks.

Being aware of the need for customized products, 84% of Insurers and 80% of InsurTechs say they are focusing on “developing new offerings.”

#8 Products that Engage and Educate Customers

Gamification, video-chat sessions, and social media are promising channels for engaging with customers and educating them about risks and their need for coverage. Healthy interactions with customers through their preferred channels can boost sales.

“Insurers should focus on providing user friendly, transparent information via digital channels, allowing customers to make an informed decision. This will be critical not only for upselling, but also for attracting more new-generation customers, who are tech savvy and want to make faster product decisions.”

70% of insurers and 85% of InsurTechs believe a lack of technological readiness is a critical concern.

The more quickly Insurers implement initiatives, the closer they will be to achieve the digital maturity and hence actively participate in the connected ecosystem. The agile digital infrastructure demands real-time data gathering and analytics and automation of complex processes.

It will also lead to product agility. Insurers can offer new products at a faster pace and with reduced GTM (go-to-market) time, they can gain a competitive advantage.

Join our Webinar — AI for Data-driven Insurers: Challenges, Opportunities & the Way Forward hosted by our CEO, Parag Sharma as he addresses Insurance business leaders and decision-makers on April 14, 2020.

Not only claims processing and underwriting, but much more insurance back and front-office operations can also be automated. Automation brings two-fold benefit to the insurers. One- mundane tasks are carried by machines, speeding the processes and freeing humans for sophisticated work. The other benefit lies in enhanced accuracy.

For example, AIA Hongkong has improved claims processing time by 40% through AI-driven ICR techniques and intelligent process automation.

We’re AI-first products and solutions firm for the new-age digital insurer recognized among the InsurTech100 for pioneering the transformation of the global insurance industry. Drop us a line at hello@mantralabsglobal.com to know more about our offerings.

According to the International Monetary Fund (IMF), the global economy is expected to shrink by over 3 percent in 2020 – the steepest slowdown since the Great Depression of the 1930s. To understand the impact of the COVID crisis in the Latin American Insurance Industry, we interviewed Mr. Horacio Sanchez- Granel from Buenos Aires, Argentina, and Insurance & Reinsurance Consultant.

Mr. Horacio has been Chairman and CEO of Boston Seguros, P&C and Life Insurance company for 21 years. Previously, he held senior executive positions in three insurance companies and has several years of experience managing financial service institutions. He has also held other executive positions in an Argentinian oil company and a tractor and industrial machinery international company. Currently, he is a Board Member and part of the Executive Committee in Nacion Seguros, the state-owned insurance company. He also works as an insurance and reinsurance consultant for Argentine and Latin American markets.

Customer Relationship during the pandemic

Insurance companies play a pivotal role during times of economic stress by helping companies and individuals manage risks and cushion against losses. How should Insurers respond to their customer’s needs, especially since there will be scrutiny about how they respond during this critical time — and it will dictate public perception for many years to come?

Mr. Horacio: Insurers must safeguard the interests of their clients and advise them on the scope of the coverage. They must communicate that the coverage is not infinite but rather has limits in terms of the risks covered, amount insured, and the origin of the claim. There are doubtful cases but insurers should be flexible enough and protect their client from damages. It was not possible to predict COVID-19. Both Life and P&Cs have been affected and have huge arrears to be paid.

On the other hand, claims processes need to be more transparent. They should adhere to the compliances of the insurance companies. In these times, selling agents and insurance brokers should be more flexible and build close relationships with the clients. They should explain to them the possibility of the claim they are trying to reimburse. In Latin America, we don’t have many claims related to business interruption. That coverage is not very common here.

Especially in Argentina, businesses have slowed down due to lockdowns. The claims ratio in this area is going down but claims in life insurance policies have increased a bit. However, the impact here is not as big as the USA or Europe.

Business Continuity in the time of Pandemics

What are some new business models that Insurance Carriers are considering to meet the expectations of life in ‘The New Normal’? More specifically, where is the new business going to come from, for Insurance, over the next two years?

Mr. Horacio: The outbreak of the COVID-19 pandemic has changed the dynamics of work culture, human relationships, and daily routines. Many companies including insurers are adopting digital solutions within their operations. Organizations are reimagining their business models to adapt to new paradigms to be more sustainable and profitable.

The New Normal has given rise to new coverages in various insurance lines to cover risks originated by this pandemic or any possible future pandemics.

For example, new clauses such as Loss of Profit due to business interruption and pandemics in Life and Health insurance, and worker’s compensation will now be included in the respective policies. Interruption of business processes entails new set-up and investment. Some other new coverages will also be introduced such as the cost of maintenance due to the non-use of offices, premises, or industrial facilities. Cyber Insurance will now be a must as most of the workforce is working remotely. The rate of cybercrimes was much higher in developed countries before the pandemic, but now even the developing countries are at risk. This will accelerate the need for Cyber Insurance in developing countries.

Road to recovery

Many General Insurance lines are hit- Travel, Motor, Home – what will be the road to recovery for these Insurance lines?

Mr. Horacio: Since people are avoiding travel altogether, the travel and motor insurance industry are hit badly. Many customers in Argentina are asking Insurance companies to give some discount on the premiums. We will see some big changes in these insurance lines. Going forward, on-demand or pay-as-you-use policies will prevail more in these insurance lines.

Role of AI in pandemic crisis management

Before the Pandemic crisis began, technologies like AI have been instrumental in modernizing the business of insurance and advancing their digital transformation. Where are some of the biggest gaps being exposed to insurance organizations, and How is technology going to solve these problems?

Mr. Horacio: Going forward, AI along with IoT and other technologies will play a crucial role in the Insurance industry as a whole. They will rely on statistical analysis of large databases to predict future behaviors. The new challenge is how to incorporate unknown risks into the existing models to be able to properly underwrite and price risks, anticipate client behavior, facilitate complex operating processes, manage complex claims and detect possible frauds.

Financial assets are the main asset of an insurance company. They are under the influence of the volatility of financial markets. Technology here can help by analyzing different scenarios but the ultimate decision is in the hands of the banks.

Challenges & opportunities in adoption of AI

Why Insurers hesitate to invest in AI?

Mr. Horacio: Companies were investing in technology earlier, but now it has accelerated due to the unprecedented change brought about by COVID-19 pandemic. Not just the developed countries but in developing countries such as Latin America, I see a big wave of new investments in technology. Technology companies are also looking forward to this change. Insurers will eventually overcome their hesitation and invest more in AI and other technologies.

Which area will see max Investment in AI- claims, underwriting, fraud detection, marketing in Argentina, and Latin American Insurance markets?

Mr. Horacio: Before the outbreak of the COVID-19 pandemic, investment in AI was more targeted towards claims, fraud, underwriting, back-office operations, etc. Going forward, predicting future scenarios will be a challenge. Historical data might not be useful here. Therefore, in the New Normal, all aspects of an Insurance company will have to be developed under the umbrella of AI.

Product Innovation

Consumers, now more than ever are seeking value-added experiences with the products & services they buy. How will these expectations amidst this Pandemic backdrop impact new product innovation within insurance?

Mr. Horacio: Customers want a more palpable relationship with their insurers. Customer Experience is going to be a fundamental aspect during the purchase of insurance coverage. In addition to being simple, the purchase and subscription process will have to be perceived as a service that accompanies the client at every moment they need it. These additions will help insurers gain more information on their customer’s actions and behavior. Based on this data, they can dynamically adapt the coverage and pricing of the product. I call it — Dynamic-on-demand coverage.

Challenges in Latin American Insurance industry

What are some of the technological challenges faced by Insurers in Argentina and Latin American markets operating in the New Normal?

Mr. Horacio: Insurance industry for many years has been static but now is moving forward in many ways. The world including the Latin American Insurance is witnessing rapid development in terms of technology. The InsurTech industry is parallel to the Insurance industry. It aids in the development of the insurance companies. The whole world of insurance is making advances in technology. Different economics have different buying patterns for insurance products. One such insurance product that should develop is Microinsurance.

Microinsurance needs technology, without which it is very difficult to manage. In a sense, the outbreak of COVID-19 was beneficial in accelerating these technological developments.

Insurance buying behavior in the post-pandemic world

In a post-pandemic World, will insurance ever be bought offline? Or have we crossed the threshold for now buying policies purely online?

Mr. Horacio: Personal line insurances such as car, accident, personal, travel, microinsurance are mostly purchased online. In Argentina, 60% of the insurance policies are sold by traditional marketing and sales through brokers. However, in commercial, industrial, energy, transport, and large companies in general, the marketing and sales will continue the traditional ways but through electronic means. The use of IoT, sensors, drones dynamically monitoring the facilities and processes in different industries is increasing. Argentina, which is an agro-based country already has technologies such as drones and IoT which monitor the crops in place. AI will surely be crucial here to analyze the data and enable quick decisions in case of a fire or an accident.

Wrapping up

Summing up — Mr. Horacio Sanchez-Granel shared valuable insights on the challenges in the Latin American Insurance Industry, how AI technologies can aid in policymaking and rise in dynamic-on-demand policies in the post-pandemic world.

AI is going to be essential for Insurers to gain that competitive edge in the post-pandemic world. Check out Hitee — an Insurance specific chatbot for driving customer engagement. For your specific requirements, please feel free to write to us at hello@mantralabsglobal.com.